Oct. 5, 2012

Work on the Music City Center is seen in August 2012. / Samuel M. Simpkins / File / The Tennessean

Written by

Jaquetta White

The Tennessean

Music City Center: A look at the Music City Center in August.

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The cost to run the Music City Center in its first fiscal year of operation will be about $4 million more than previously projected, according to a budget approved by Convention Center Authority members on Thursday.

The increase is linked to the expected doubling of the Music City Center’s projected utility bill, which is estimated to total $5.3 million from July 2013 to June 2014. The authority had been working under the assumption that it would pay about $2.5 million in utilities in that one-year period, based on a demand and feasibility study of the Music City Center project generated by hospitality consulting firm HVS in 2010.

Utilities include gas, electricity, water and sewer, telecommunications and cable charges.

The variance exists because the HVS study was conducted around a building that had not yet been built, said Nashville Convention Center Executive Director Charles Starks, while the more recent number includes newer estimates from Nashville Electric Service and District Electric Service using more accurate information about the 1.2 million-square-foot building.

“They had to build numbers to a building that was not designed,” Starks said of HVS. “It would not be prudent of us not to go with the estimates of those utilities. Certainly we wish it was closer to (the HVS estimate).”

Starks said the Music City Center, like the current Nashville Convention Center, will receive its heating and cooling from a central Digital Electric Service plant located downtown. The facility will not house its own plant with chillers and boilers.

A big part of the center’s utility expense comes from paying for that service, which includes sharing in the cost of the plant’s upkeep, Starks said.

“It’s basically like leasing something as compared with purchasing it. We’re renters instead of owners,” Starks said. “You pay more for the chilled water and the steam than you would if you had your own physical plant.”

According to the operational budget approved at Thursday’s Convention Center Authority meeting, the Music City Center will generate about $14.6 million in revenue in its first fiscal year. That’s down from a $20.8 million estimate provided by HVS. But, the HVS study had the building opening in January, Starks said. It will open in May and the first convention groups won’t meet until June.

The convention center generates revenue by charging for space, parking, food and beverages and other services.

Under the current budget, the Music City Center will record a net loss of $4.8 million in its first fiscal year, up from the $2.3 million deficit HVS had projected.

The Music City Center, like most convention centers around the nation, is expected to operate as a loss leader. That means, it will make little, if any, money each year and will operate, instead, with a goal of bolstering other Nashville businesses, such as hotels, restaurants and other attractions by driving tourists to town.

Mark Arnold, a member of the authority’s finance and audit committee, said the board will have a better idea of how to budget in fiscal year 2015, after the center has been operating for a while.

“It will be a very different exercise once we learn what it takes to heat and cool the building,” Arnold said.